TIDMDPV5
Downing Planned Exit VCT 5 plc
Half Yearly Report for the six months ended 31 May 2011
PERFORMANCE SUMMARY
31 May 30 Nov 31 May
2011 2010 2010
pence pence pence
Net asset value per share 34.0 34.5 38.3
Cumulative dividends per share 56.0 56.0 56.0
---------------------------
Total return per share * 90.0 90.5 94.3
* Net asset value per share plus dividend paid to date
FORTHCOMING DIVIDEND
The Company has declared the following dividend:
Date payable Ex-div date Amount per share
26 August 2011 10 August 2011 18.0p
CHAIRMAN'S STATEMENT
I present my report for the six months ended 31 May 2011.
Portfolio review
As Shareholders will be aware, the Company is now working towards realising the
remainder of its investment portfolio in order to return funds to Shareholders.
During the period to 31 May 2011 there was limited investment activity, but
three major realisations have occurred since the period end.
The investments in West Tower Holdings Limited, Hoole Hall Country Club Limited
and Hoole Hall Spa and Leisure Club Limited have each been disposed of at prices
approximately equal to original cost and previous carrying value. Although these
exits took much longer to achieve than had been planned, the fact that the
Company was able to recover full value on investments in leisure assets
originally made prior to the major financial turmoil of the late 2000's, is seen
as a successful outcome. The investment in Chapel Street Hotel (2008) LLP was
also realised in June, producing a small gain.
The Company now has two major investments remaining: Coast Constructors Limited
and Heyford Contracting (South) Limited.
Coast Constructors Limited is building an apartment and hotel resort, known as
Gara Rock, in South Devon on land which is owned by Aminghurst Limited. The
project has undergone a number of changes from its original plan and has been
significantly delayed as a result. However, the apartments are now complete and
a full marketing effort is underway. In order to fund the completion of the
apartments, the Company had to invest a further GBP636,000 in the project in
January 2011. There is also an additional funding requirement for the
completion of the hotel and, as a result, a further investment of approximately
GBP500,000 is expected to be made by the Company shortly.
The hotel is expected to commence operations in early 2012. Sales of the
apartments are progressing, albeit at a slow rate. With the main show apartment
recently opened, it is hoped that sales momentum will build over the summer
months. A full exit from the investment will depend on the sale of all the
apartments and a transaction involving the hotel, so timing is not clear but we
hope to see significant progress before the end of the year.
Heyford Contracting (South) Limited has been undertaking two contracts to build
commercial office units: the North Gate site in Banbury, Oxfordshire and the
Uppingham Gate site in Uppingham in the East Midlands. Both of the sites
comprise seven units, of which two are unlet at North Gate and four are unlet at
Uppingham Gate. With most of the building work complete, the focus has now
shifted to marketing the remaining units. An exit from the investment is
dependent on most of these remaining units being let or sold.
Of the other smaller investments that the Company still holds, it is expected
that the investment in Sanguine Hospitality Limited will be realised shortly at
close to original cost and negotiations are ongoing in seeking an exit from
Future Films Production Services Limited.
The Board has reviewed the valuation of the remaining investments at the period
end and made some adjustments to the previous carrying values. The valuation of
Heyford Contracting (South) Limited has been reduced by GBP200,000 in view of the
uncertainty regarding the exit from the investment.
A further provision of GBP22,000 has been made against Coast Constructors Limited,
based on the latest estimates of the final outcome of the project. A provision
of GBP64,000 has also been made against the remaining investment in Future Films
Limited, as a result of doubts about the collectability of a debt due from a
third party. In total, valuations have been reduced by GBP286,000.
Net Asset Value and results
At 31 May 2011, the Net Asset Value per share ("NAV") of the Company stood at
34.0p, a decrease of 0.5p (1.5%) since the year end of 30 November 2010. Total
return (NAV plus cumulative dividends paid to date) is now 90.0p. No provision
has been made for any performance incentive as the relevant hurdles have not yet
been met. Further details are given in note 8.
The loss on ordinary activities after taxation for the period was GBP108,000,
comprising a revenue gain of GBP178,000 and a capital loss of GBP286,000.
Dividend
As a result of the realisations mentioned above, the Company is now in a
position to declare a further dividend. A dividend of 18p per share will be paid
on 26 August 2011 to Shareholders on the register at 12 August 2011. This will
bring total dividends paid to Shareholder since launch to 74.0p per share.
Winding up plans
In accordance with the Company's Articles of Association, a resolution was put
to Shareholders at the AGM in May proposing that the Company discontinue as a
Venture Capital Trust. The resolution was passed such that the Directors now
need to put formal proposals for the liquidation, reorganisation or
reconstruction of the Company to Shareholders by February 2012.
In view of the small size of the Company once the dividend described above has
been paid, the Board is proposing to go into members' voluntary liquidation
shortly after its payment. This will involve the appointment of a liquidator who
will oversee the exit from the remaining investments and the return of the
further funds to Shareholders. Entering members' voluntary liquidation allows
the VCT to benefit from a relaxation of certain VCT regulations which reduces
running costs and avoids other difficulties that might be faced in realising the
remaining portfolio. It is planned that the existing investment management team
will continue in their role throughout the liquidation process.
A circular with formal proposals for the appointment of the liquidator will be
prepared and circulated to Shareholders in the near future.
Share buybacks
In view of the fact that the Company is now in the later stages of unwinding its
portfolio, the Board wishes to have tight control over the Company's liquid
funds and does not wish to expose the Company to any unpredictable cash
outflows. The Company is therefore unlikely to undertake any further share
buybacks and the Board recommends that Shareholders continue to hold their
shares while the remaining value is returned to them by way of dividends and
distributions.
No share buybacks were made in the six months to 31 May 2011.
Risk and uncertainties
Under the Disclosure and Transparency Directive, the Board is required in the
Company's half-yearly results to report on principal risks and uncertainties
facing the Company over the remainder of the financial year.
The Board has concluded that the key risks facing the Company over the remainder
of the financial period are as follows:
(i) investment risk associated with investing in small and immature businesses;
and
(ii) failure to maintain approval as a VCT.
In order to make VCT-qualifying investments, the Company has invested in small
businesses which were mostly immature. The investments have been structured,
where possible, to take a charge over the assets of the business. In addition,
investments are closely monitored by the Investment Manager. The Board is
satisfied that this approach reduces the investment risk as far as reasonably
possible.
The Company's compliance with the VCT regulations is continually monitored by
the Administration Manager, who reports regularly to the Board on the current
position. The Company also retains PricewaterhouseCoopers to provide regular
reviews and advice in this area. The Board considers that this approach reduces
the risk of a breach of the VCT regulations to a minimal level. The plans for
the Company to take advantage of the VCT winding-up regulations by entering
members' voluntary liquidation will also further reduce the chance of a possible
breach.
Going concern statement
The Company is now required to make a statement about going concern within its
half-yearly report. The Board considers that the Company has sufficient
financial resources at the period end and has limited and predictable expenses
and liabilities. As a result, the Directors believe that the Company is well
placed to manage its business risks successfully.
The Directors confirm that they are satisfied that the Company has adequate
resources to continue in business for the foreseeable future. For this reason
they believe that the Company continues to be a going concern and that it is
appropriate to apply the going concern basis in preparing the financial
statement.
Although the Board has plans for the Company to enter members' voluntary
liquidation in due course, the Directors do not believe this has any impact on
the ongoing valuations of the investments as they will continue to be stated at
fair value until they are realised.
Outlook
It has taken longer than expected for the Company to achieve its most recent
realisations, primarily due to the continued difficulties in the banking and
property sectors and the time and effort that has been needed to secure bank
funding to allow exits from certain investee companies.
The remaining investments, namely Coast Constructors Limited and Heyford
Contracting (South) Limited, face different challenges before exits can be
achieved. The timetable for the next significant distribution to Shareholders
will be determined by the progress of sales of the apartments at Gara Rock and
the sales or lettings of the commercial units at Uppingham and Banbury.
The plans to enter members' voluntary liquidation will produce cost savings for
Shareholders while these final realisations are pursued and should not have any
significant negative impact on Shareholders. Formal proposals will be sent out
soon seeking Shareholder approval for these plans.
Hugh Gillespie
Chairman
UNAUDITED INCOME STATEMENT
for the six months ended 31 May 2011
Six months ended
31 May 2011
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Income 315 - 315
Gain/(losses) on investments - (286) (286)
-----------------------
315 (286) 29
Investment management fees (30) - (30)
Other expenses (60) - (60)
-----------------------
Return/(loss) on ordinary activities before taxation 225 (286) (61)
Taxation (47) - (47)
-----------------------
Return/(loss) attributable to equity shareholders 178 (286) (108)
Return/(loss) per share 0.9p (1.4p) (0.5p)
Six months ended Year ended
30
31 May 2010 November
2010
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Income 131 - 131 203
Gain/(losses) on investments - 186 186 (590)
----------------------- -----------
131 186 317 (387)
Investment management fees (61) - (61) (100)
Other expenses (72) - (72) (134)
----------------------- -----------
Return/(loss) on ordinary activities before (2) 186 184 (621)
taxation
Taxation (2) - (2) -
----------------------- -----------
Return/(loss) attributable to equity (4) 186 182 (621)
shareholders
Return/(loss) per share (0.1p) 0.9p 0.8p (3.0p)
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains and losses are recognised in the Income Statement as noted above.
UNAUDITED SUMMARISED BALANCE SHEET
as at 31 May 2011
31 May 31 May 30 Nov
2011 2010 2010
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 6,362 8,071 6,026
Current assets
Debtors 367 88 133
Cash at bank and in hand 534 37 1,194
------------------------
901 125 1,327
Creditors: amounts falling due within one year (99) (121) (81)
------------------------
Net assets less current liabilities 802 8,075 7,272
Creditors: amounts falling due after more than one year
(21) (21) (21)
------------------------
Net assets 7,143 8,054 7,251
Capital and reserves
Called up share capital 210 210 210
Capital redemption reserve 7 7 7
Special reserve 9,785 9,785 9,785
Capital reserve - realised 2 2 2
Revaluation reserve (2,999) (1,937) (2,713)
Revenue reserve 138 (13) (40)
------------------------
Equity shareholders' funds 7,143 8,054 7,251
Net asset value per share 34.0p 38.3p 34.5p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
31 May 31 May 30 Nov
2011 2010 2010
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 7,251 18,384 18,384
Purchase of own shares - - -
Dividends paid - (10,512) (10,512)
Total recognised (loss)/gain for the period (108) 182 (621)
-------------------------------
Closing shareholders' funds 7,143 8,054 7,251
UNAUDITED CASH FLOW STATEMENT
for the six months ended 31 May 2011
31 May 2011 31 May 2010 30 Nov 2010
Note GBP'000 GBP'000 GBP'000
Cash inflow from operating
activities and returns on 1
investments (38) 117 (9)
------------- ------------- -------------
Taxation
Corporation tax paid - (68) (54)
------------- ------------- -------------
Capital expenditure
Purchase of investments (636) (170) (169)
Proceeds from disposal of 14 1,677 2,945
investments
------------- ------------- -------------
Net cash (outflow)/inflow from
capital expenditure (622) 1,507 2,776
------------- ------------- -------------
Equity dividends paid - (10,512) (10,512)
------------- ------------- -------------
Net cash outflow before financing (660) (8,956) (7,799)
Financing
Shares repurchased - - -
------------- ------------- -------------
Net cash outflow from financing - - -
------------- ------------- -------------
Decrease in cash 2 (660) (8,956) (7,799)
Notes to the cash flow statement:
1 Cash inflow from operating activities and returns on investments
Net (loss)/gain before taxation (61) 184 (621)
Losses/(gains) on investments 286 (186) 590
(Increase)/decrease in other debtors (234) 117 72
(Decrease)/increase in other creditors (29) 2 (22)
Decrease in amount due to subsidiary undertaking
- - (28)
------- --------- --------
Net cash (outflow)/inflow from operating activities
(38) 117 (9)
2 Analysis of net funds
Beginning of period 1,194 8,993 8,993
Net cash outflow (660) (8,956) (7,799)
------- --------- --------
End of period 534 37 1,194
SUMMARY OF INVESTMENT PORTFOLIO
as at 31 May 2011
Unrealised % of
gain/(loss) portfolio
Cost Valuation in the period by value
Venture Capital Investments GBP'000 GBP'000 GBP'000 GBP'000
VCT qualifying
West Tower Holdings Limited 1,750 1,750 - 25.4%
Coast Constructors Limited 1,755 1,257 (22) 18.2%
Hoole Hall Spa and Leisure Club Limited 1,000 1,000 - 14.5%
Heyford Contracting (South) Limited 1,500 875 (175) 12.7%
Hoole Hall Country Club Holdings Limited 875 875 - 12.7%
Future Films Production Services Limited 128 64 (64) 0.9%
----------------------------------------
7,008 5,821 (261) 84.4%
----------------------------------------
Non-VCT qualifying
Sanguine Hospitality Limited 243 237 - 3.5%
Chapel Street Hotel (2008) LLP 63 126 - 1.8%
Heyford Contracting (South) Limited 150 125 (25) 1.8%
Vermont Developments Limited 902 50 - 0.7%
Chapel Street Hotel Limited 3 3 - 0.0%
Aminghurst Limited 992 - - 0.0%
----------------------------------------
2,353 541 (25) 7.8%
----------------------------------------
Total 9,361 6,362 (286) 92.2%
Cash at bank 534 7.8%
----------- ----------
Total investments 6,896 100.0%
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 31 May 2011
Addition
GBP'000
VCT qualifying investment
Coast Constructors Limited 636
Disposal
Profit/
Cost Proceeds (loss)
GBP'000 GBP'000 GBP'000
VCT qualifying investment
Future Films Production Services Limited 14 14 -
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half yearly financial results cover the six months to 31 May
2011 and have been prepared in accordance with the accounting policies set out
in the statutory accounts for the year ended 30 November 2010, which were
prepared under UK Generally Accepted Accounting Practice ("UK GAAP") and in
accordance with the Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" revised January 2009
("SORP").
2. All revenue and capital items in the Income Statement derive from continuing
operations.
3. The Company has only one class of business and derives its income from
investments made in shares, securities and bank deposits.
4. The comparative figures were in respect of the six-month period ended 31 May
2010 and the year ended 30 November 2010 respectively.
5. Net Asset Value per share has been calculated on 21,024,816 shares, being the
number of shares in issue at the period end.
6. Return per share for the period has been calculated on 21,024,816 shares,
being the weighted average number of shares in issue during the period.
7. Dividends paid
31 May 2010 30 Nov 2010
31 May 2011
Revenue Capital Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Paid in period/year
2010 Interim - - - 8,410 8,410
(40.0p paid 1 March 2010)
2009 Final - - - 2,102 2,102
(10.0p paid 6 January
2010)
--------- --------- ------- ------------- ------------
- - - 10,512 10,512
8. Reserves
Capital Capital
redemption Special reserve Revaluation Revenue
reserve reserve - realised reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 December 7 9,785 2 (2,713) (40) 7,041
2010
Losses on - - - (286) - (286)
investments
Dividends paid - - - - - -
Share buybacks - - - - - -
Retained - - - - 178 178
revenue
Transfer - - - - - -
------------------------------------------------------------------
At 31 May 2011 7 9,785 2 (2,999) 138 6,933
The Special Reserve is available to the Company to enable the purchase of its
own shares in the market without affecting its ability to pay capital
distributions. The Special Reserve and Revenue Reserve are both distributable
reserves.
9. Contingent liability re. performance incentive fees
The Company may be liable to pay performance incentive fees by way of additional
interest on the loan notes issued to the Management Team and Directors. The
amount of additional interest, if any, is dependent on the level of
distributions made to Shareholders before 5 April 2012. The maximum amount
payable under these arrangements is summarised as follows:
(i) 10% of the net proceeds paid to Shareholders before 5 April 2010;
(ii) 5% of the net proceeds paid to Shareholders between 6 April 2010 and 5
April 2011; and
(iii) 2.5% of the net proceeds paid to Shareholders between 6 April 2011 and 5
April 2012.
No performance fee is payable unless Shareholders (who invested at the launch of
the Company) have received proceeds of at least 80p per share and achieved a
compound return on their investment in excess of 8% per annum.
If the Company's assets and liabilities were realised at the current carrying
values and the compound return and other targets met, the maximum level of
performance fees payable would be approximately GBP720,000 (equivalent to 3.4p per
share). In view of the significant uncertainties as to what extent the targets
will actually be met, the Directors are unable to make a reliable estimate of
the performance fees (if any) that will ultimately be payable.
Other than as described above, at 31 May 2011, the Company had no contingencies,
guarantees or financial commitments.
10. The unaudited financial statements set out herein do not constitute
statutory accounts within the meaning of Section 434 of the Companies Act 2006
and have not been delivered to the Registrar of Companies.
11. The Directors confirm that, to the best of their knowledge, the half-yearly
financial statements have been prepared in accordance with the "Statement: Half-
Yearly Financial Reports" issued by the UK Accounting Standards Board and the
half-yearly financial report includes a fair review of the information required
by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the financial
year and their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period, and any changes in the related
party transactions described in the last annual report that could do so.
12. Copies of the half yearly report will be sent to Shareholders shortly.
Further copies can be obtained from the Company's registered office or can be
downloaded from www.downing.co.uk.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Downing Planned Exit VCT 5 PLC via Thomson Reuters ONE
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